Extracts from the SauerReport

Customs and tax authorities in China are said to be very active again in the leather world so many a tanner has to keep looking over his shoulder.

In Europe, all trade remains almost entirely dependent on the euro-dollar rate which continues to change every day. One day there is hope, the next day calculations are in shambles. In short, a trade to cause nervous breakdowns.

What is clear is that there is interest to buy and, once a deal is concluded, shipments often need to be fast. From this, one may conclude there is business to be done and there are few stocks with the world's tanners.

The latter is not necessarily a bad or weak point as industries everywhere try to minimise money absorbing stocks. It is also true that one should avoid being caught without any raw materials when orders come in.

Many believe that the moment orders surface, raw prices will jump immediately. From an objective point of view, hide prices are low and attractive at present and seem to offer more space upwards than downwards.

There is also news about a revival of the 'European Hide Cocktail' trade to Asia, no doubt forced by the low prices tanners there are prepared to pay. There is still is no such thing as the best quality for the lowest price and as long as this is understood, there is business to be done.

The trade in Europe does not expect to see hide prices fall much further and individual trade is extremely slow in most places. Abattoirs (the big ones) do not seem that much worried. Fact is that more and more big abattoirs are making fancy deals with tanners under very private conditions.

The meat trade must move hides. They want to deal in meat, not hides. Slow or busy leather trade is all the same to them and of no real interest. Those dirty stinking animal skins must not hang around their meat packing plant too long.

Big tanners/groups know how to work on that and, even in lousy times, may make deals at bargain prices guaranteeing to take a big volume, sometimes for a lengthy period of time. This is the kind of trade of which we shall never hear the details, but it is clearly interesting for the two parties concerned. To use the words of one source 'hides just happen to disappear quietly with no sound.'

News from the Anpic leather fair revealed that although attendance was satisfactory, it was down on last year. From a business point of view, it does not seem to have changed anything. The business done would have been done without the fair and at the same prices too.

Initially US car sales in January and February did not produce the figures that were counted on and this led to expectations for all of 2004 being downscaled and a number of car and car part makers saw their shares tumble.

Automotive tanners in the USA were reported to have reduced weekly working hours by something like half a day. Car makers were also pushing them for lower prices. However, the end of February saw a run on cars and 1.3 million were sold which means 5% more than in February 2003.

A few more tanners in Italy report better orders, especially in the leathergoods and upholstery sector. I must draw your attention to the words 'a few' but this is still better than nothing. Leather prices remain low, however, and unattractive.

Orders come slowly and raw hide sales prices continue to decline including the heavy types which showed more resistance than the rest till now. The country has been talking for some time about financial problems and recent bankruptcies (one in the north and one in S Croce) add more fuel to people's worries.

In addition, one of the big tanning groups in northern Italy is reported as restricting its activities to the production of wet-blue and more than 80 people will lose their jobs.

Traders report that the Turks are now the only buyers left of doubleface lambskins and that, hence, it is them who set the market price.

The European wool industry utters the same complaints as the fellmongers here. There is little wool available (as there are few skins) but also little demand and the prices are low and unattractive. The whole sector has simply moved to China.

Reports state that in Taiwan, the volume of orders is inching upwards while still remaining far below normal levels. Tanners are buying carefully and looking for bargains. We are now looking at May shipments for any new business.

If the USDA story of the big volumes of American hides sold to Korea is true, it would fit with the report that tanning activity is back to normal levels. While upholstery tanners are the happiest ones, the positive news also relates to the side leather industry.

Interest for small skins is shifting from goat to sheep. India and Pakistan are among the main buyers for this product and China shows increased interest. The main reason why goats are out of favour is the lack of interest for suede on a global basis.

The other major destination for goats, for lining leathers, shows few possibilities as long as India sells finished linings for prices at which most other producing countries cannot even offer on wet-blue. For shoe uppers, demand for goat is equally limited because of the depressed state of the dress shoe industry in Europe.

News from major players in the South American tanning industry Brazil and Argentina, and also from Uruguay, is not bad at all. The general success of the upholstery leather business must be closely related, although the shoe trade also seems to be doing well. Together with improving news from Asia, this is all in sharp contrast with the continuing depressing news from Europe where very little seems to be happening.

In today's markets, consumer preference does not seem to allow higher prices for leather products. They want the nice leather product, but not if it has to cost more. And for the moment it seems we have to live with that fact and produce leather at a price that fits in that system.

Ron Sauer

ronsauer@wanadoo.fr

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